Embarking on a journey towards higher education is a significant milestone in your life. It opens up doors to a world of opportunities and personal growth. However, the cost of quality education can be daunting, and this is where education loans come to the rescue. In India, education loans have gained popularity as a means to fund higher studies.
According to RBI data, the outstanding portfolio of education loans increased by 17% to 96,847 crore in 2022-23, up from 82,723 crore the previous year. The rising expense of education, the pursuit of quality education, global aspirations, government backing, job market competitiveness, flexible repayment choices, and tax benefits all influence the decision to take out education loans in India.
These factors, along with an increase in the number of educational institutions and students pursuing higher education, contribute to the country’s increasing demand for education loans. This comprehensive guide delves into the nitty-gritty of education loans in India, exploring the expenses they cover and when you can start paying EMIs.
A Closer Look at Education Loan in India
Before we dive into the specifics, let’s gain a better understanding of what an education loan is and how it operates in the Indian context.
What is an Education Loan?
An education loan is a financial tool designed to help students and their parents cover the expenses related to higher education. It typically covers tuition fees, examination fees, library and laboratory fees, the cost of books and equipment, and even living expenses if you’re studying abroad.
Also Read: Student Loans: Your Ticket to a Brighter Future
Education Loan Interest Rate
One of the key factors to consider when applying for an education loan in India is the interest rate. The education loan interest rate can vary from one lender to another and may also depend on the loan amount and the course you’re pursuing. As of February 2023, education loan interest rates in India varied between 8.30% and 17.45%. However, it’s crucial to keep in mind that these interest rates might have changed by now. To ensure accuracy, it’s recommended that you verify the current rates with different banks and financial institutions.
Expenses Covered by Education Loans
Education loans are designed to ease the financial burden of pursuing higher education. Here are the primary expenses covered by education loan in India:
Tuition Fees: The most significant chunk of your educational expenses is often the tuition fees. Education loans typically cover the entire tuition fee for the course.
Examination Fees: These include fees for examinations conducted during your study, such as semester exams or certification exams.
Books and Equipment: Education loans can also be used to purchase the necessary books, study materials, and equipment required for your course.
Hostel and Accommodation: If you’re studying away from home and residing in a hostel or rented accommodation, the loan can cover the rent and related expenses.
Travel Expenses: In the case of overseas education, education loans can cover travel expenses like airfare.
Other Miscellaneous Expenses: This category includes expenses like library fees, laboratory fees, project work costs, and insurance premiums.
When Can You Start Paying EMIs?
Now, let’s address a common concern among education loan applicants: When do you need to start repaying the loan? The repayment process typically begins after the completion of your course, and there’s usually a grace period provided to allow you to find your footing in the job market. Here’s a detailed breakdown:
Moratorium Period: The moratorium period, also known as the “grace period’, is the time during which you are not required to make any EMI payments. This period extends from the start of your course until a few months (usually 6-12 months) after you complete your studies. The idea behind this grace period is to give you time to secure a job and stabilize your finances before starting loan repayment.
EMI Calculation: Your EMI amount is calculated based on various factors, including the loan amount, interest rate, and repayment tenure. Banks and financial institutions usually offer flexible repayment options, allowing you to choose a tenure that suits your financial situation.
Partial Interest Payment: During the moratorium period, you have the option to make partial interest payments. This can help reduce the overall interest burden on the loan, and some lenders might even offer interest-only payments during this period.
Loan Subsidy: In some cases, the government provides interest subsidies on education loans, especially for economically disadvantaged students. This means the government covers a portion of the interest, making the loan more affordable.
Repayment Commencement: Once the moratorium period ends, you are expected to start repaying the loan in Equated Monthly Installments (EMIs). The exact date of commencement depends on the lender’s terms and your chosen repayment plan.
Education loans in India have evolved to become a crucial financial tool that empower students to pursue their dreams of higher education. They cover various expenses, from tuition fees to living costs, and provide a flexible repayment structure that eases the financial burden.
To ensure you make the most informed decisions regarding education loans, stay updated on developments like changes in education loan interest rates and government initiatives. Before signing any loan agreement, carefully review its terms and conditions. This diligence will help you explore all available options and secure the best loan package tailored to your needs and the current interest rates.
If you’re facing financial limitations while chasing your career aspirations, it’s worth considering the prospect of education loans. With these loans, you have the freedom to select your desired university and pursue your education without financial constraints. To discover convenient and cost-effective education loan options, take a look at Varthana’s comprehensive guide on applying for student loans online. The services are tailored to transform your educational aspirations into a tangible reality.
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